The Trans-Pacific Partnership (TPP) is a proposed free trade agreement (FTA) currently being negotiated between the U.S. and 11 other countries—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.  If successfully implemented, TPP would remove tariffs and other barriers to trade in an effort to facilitate export/import between parties to the agreement.  

According to published sources, the countries involved in TPP include some of the “biggest and fastest-growing [U.S.] commercial partners,” accounting for $1.5 trillion worth of trade in goods in 2012 and $242 billion worth of services in 2011.  And that these nations are cumulatively responsible for “40% of the world’s GDP and 26% of the world’s trade.”

Of the 11 other countries involved in these negotiations, the U.S. already has FTAs with six of them (Canada and Mexico under the North American Free Trade Agreement, or NAFTA, as well as Australia, Chile, Peru, and Singapore).  So while TPP would add five more nations to the list of U.S. FTA partners, it also seeks to codify labor and environmental protection provisions that were included in previous negotiations albeit with little enforceability.  TPP is also intended to shore up intellectual property protections and harmonize numerous regulations overseen by the participating nations, among other things.  

TPP has been widely covered by mainstream media lately due to a side issue involving a debate within the U.S. Congress over legislation needed to enact any successfully-negotiated FTAs involving the U.S.—including TPP—into place.  This legislation, the “Bipartisan Congressional Trade Priorities and Accountability Act of 2015,” or TPA for short, basically sets a framework by which Congress would have to vote on any completed FTA presented to it by the White House on an up or down basis with no ability to amend the document.  

TPA also includes an expedited timeframe for Congressional intervention such that any FTA presented for approval by the White House would automatically be enacted if Congress fails to vote it down within a specific period of time.  

Without getting into TPA specifics, the most important things to know are that there will be no Trans-Pacific Partnership Agreement unless this legislation is adopted (for a whole host of reasons) and, as this article went to press, TPA appears likely to become law within a matter of weeks. This could change at any moment, of course, given the political divisions which have engulfed Capitol Hill for more than a dozen years.  

For U.S. nonwovens producers, the ultimate impacts that would occur if TPA is enacted and the TPP negotiations bear fruit is murky. No stranger to the globalized economy, the nonwovens industry has nimbly maneuvered its way through all sorts of international trade machinations during the past 20+ years.  Still, one place to start considering possible impacts is export data.
 
There could be considerable potential for growth in U.S. exports of nonwoven roll goods (item number 5603 under the Harmonized Tariff Schedule, or HTS) to nine of the 11 other countries involved in the TPP negotiations.  This potential is based on the fact that U.S. roll good exports to Brunei and New Zealand has been nearly non-existent for the past five years; while our combined exports to Australia, Chile, Japan, Peru, Singapore, and Vietnam represent just a tiny fraction of annual exports to Mexico and Canada over the same period.  Whether or not U.S. export increases actually materialize is completely unknown however.  

Mexico and Canada became the biggest trading partners for U.S. roll goods under NAFTA largely due to the proximity of the three markets.  If TPP is enacted, therefore, it is entirely possible that one or several countries negotiating the deal— Vietnam, Singapore, or Malaysia, for instance – could come to dominate the region simply because they are more closely located.  This could leave little room for U.S. producers with these emerging markets.

Other potential impacts on the nonwovens value chain would likely fall on U.S. fiber production and could go a couple of different ways due to the “yarn forward rule.”  

Under the FTA process, the yarn forward rule has been a component of every deal the U.S. has agreed to for more than three decades.  It basically requires that virtually all fiber contained in textile materials—be it a shirt, a dress, or a nonwoven roll good/finished product—must be produced within the borders of one of the parties to the agreement to obtain duty free status when traded with any other party to the agreement.  

With NAFTA, global nonwovens producers grumble they are “cut out” of North American markets due to advantages that U.S. fiber producers have under the yarn forward rule.

When it comes to TPP, there are two primary scenarios regarding its impact on demand for U.S.-produced fiber.  The more optimistic scenario is that U.S. fiber producers will find nine new markets to ship their products duty free. These markets will grow, the thinking goes, as other TPP countries begin producing their own roll goods and/or ramp up existing production to fulfill growing domestic demand for converted good as well as new export opportunities created by TPP (think Malaysian manufacturers selling diapers made from U.S. fiber to the Japanese market as a hypothetical).  

The gloomier scenario is that one or more TPP countries could become fiber manufacturing colossuses able to undercut their U.S. counterparts throughout the TPP region.  

These concerns are well articulated in a recent report from the Congressional Research Service which notes that TPP “has the potential to shift global trading patterns for textiles and demand for U.S. textile exports [negatively],” and that “Textile industry trade groups have urged the United States to insist on a strict ‘yarn forward’ rule [under TPP] that allows a [finished textile product] to enter the U.S. duty-free only if yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region.”

Moving forward, therefore, persons who follow TPA and/or TPP as negotiations on both theoretically near endgame can expect heated media coverage of the debate between commercial interests, for example the U.S. Chamber of Commerce, National Association of Manufacturers, the Business Roundtable—versus interests of U.S. labor unions, environmentalists and parties burned by NAFTA to continue for weeks, if not months.  

The only real certainty at this point, in fact, is that the Obama Administration is furiously pushing TPA through Congress in order to implement a TPP deal which may or may not be eminent.  

While there are many stated reasons as to why these efforts are so important to the White House, the end result is that many Congressional Democrats are being put into difficult political positions with key sections of their support base due to Obama Administration pressure. This despite the fact the President and his advisors are well aware of the costs some (possibly many) of their Democratic colleagues in Congress will likely pay for doing the President’s will.

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Peter Mayberry is president of Mayberry & Associates in Washington, DC. A third-generation Washingtonian and government relations professional, he served as INDA’s Director of Government Affairs from 1989-2009. He is also the author of nonwovensregs.com and can be reached via e-mail at peter@mayberryandassociates.com.

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